Citizencredit Co-Operative Bank Limited Vs ITO (ITAT Mumbai)
A Co-operative Bank Does Not Lose Its Co-operative DNA: No TDS u/s 194A on Interest Paid to Another Co-operative Society
Background: Citizencredit Co-operative Bank Ltd. paid interest on fixed deposits maintained by various co-operative societies which were neither its members nor eligible to become members under its bye-laws. The Bank did not deduct tax at source, claiming exemption under the second limb of s.194A(3)(v).
The AO disagreed. He held that an urban co-operative bank carrying on banking business stood outside the expression “co-operative society.” He also reasoned that the Finance Act, 2015 had excluded co-operative banks from the exemption under s.194A(3)(v) with effect from 01.06.2015.
According to the AO, the specific provisions of ss.194A(3)(i)(b) & 194A(3)(viia)(b), prescribing a monetary threshold for interest paid by a co-operative bank, prevailed over the general exemption in s.194A(3)(v). The Bank was consequently treated as an assessee-in-default u/s 201(1), with interest charged u/s 201(1A).
The JCIT(A) upheld the action by relying upon an earlier Tribunal order against the Bank for the same AY. Meanwhile, that very order was reversed by the Bombay High Court on 06.08.2026.
Two Distinct Limbs of s.194A(3)(v)
The ITAT followed the Bombay High Court’s judgment in Citizen Credit Co-operative Bank Ltd. v. ITO (TDS).
